T.C. Mem o. 2 01 4- 9

UNITED STAT ES TAX COURT

STEVEN R. ESTE S, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 16 52 8- 11 L. Fil edJan ua ry 13 , 20 14
.
St ev enR. Est es , pro se. Jo na th anM. Hau ckan d Wil li am Jo hn Greg g, fo r res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION KERRIGAN, Ju dg e: The p et it io n i n thi s ca se was fi le d i n re sp on se to a Not ic e o f Det erm in at io n C on cern in g C ol le ct io n Act io n( s) un de r Sec ti on63 20
an d/ or63 30 (no ti ce o f de te rm in at io n) fortax y ears 20 04 , 20 05 , and20 06
.- 2 -

[* 2] Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o the Int ern al Rev enue Co de ineffe ctat a ll rel ev an t t im es , andall Ru le refe ren ces are t o the Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. W e ro un d a ll m on et ary am ou nt s t o the
ne ares t d ol lar. The is su es forco ns id erat io n are: (1) whet he r pe ti ti on er’s n on em pl oyee co m pe ns at io n andwage s co ns ti tu te in co m e und er s ect io n 6 1( a); (2) whet he r pe ti ti on er i s l iabl e fo r ad di ti on s t o t ax un de r se ct io ns 66 51 (a)( 1) an d (2 ) an d 66 54 (a); an d (3 ) whe th er re sp on de nt ’s det erm in at io n t o p ro ceedwith c ol le ct io n act io ns reg ard in g p et ti on er’s unp ai d i nc om e ta x l iabi li ti es fortax y ears 20 04 , 20 05 , and20 06 was p ro pe r. FINDINGS OF FACT So m e o f th e fac ts are s ti pu la te d andare s o fo un d. We in co rp or at e b y refe ren ce the st ip ul at io n o f fac ts an d the att ach edex hi bi ts . Peti ti on er re si de d i n Mary landwhen he fil edth e p et it io n. Pet it io ne r di d n otfil e Fo rm s 1 04 0, U.S. In di vi du al Inc om e Tax Return, fo r ta x years 2 00 4, 2 00 5, an d 2 00 6. Pe ti ti on er d idno t h av e an y Fed eral in co m e ta x withh el d fr om

hi s i nc om e fo r ta x years 2 00 4 and20 05 , bu t h e d idha ve $5 ,15 6 withh el d fr om

hi s g ro ss in co m e fo r ta x year 20 06 . Peti ti on er d idno t m ak e any es ti m at edFed eral in co m e ta x p aym en ts fortax y ear 2 00 4, 2 00 5, o r 20 06 . For e ach- 3 -

[* 3] tax y ear i n i ss ue res po nd en t p rep areda subs ti tu te forreturn, p ur su an t t o se ct io n 6 02 0( b) , onpe ti ti on er’s b eh al f us in g i nf orm at io n re po rte d b y

th ird -p arty pa y or s. Intax y ear 2 00 4 p et it io ne r rec ei ve d $ 49 ,71 4 i n n on em pl oyee co m

pe ns at io n fro m Pin gh o As so ci at es Co rp . In t ax y ear 2 00 5 p et it io ne r rec ei ve d $ 25 ,00 4 and $7 ,26 6 i n n on em

pl oyee co m

pe ns at io n fr om

th e Me rg e Co m

pu te r Gro up , Inc ., and TwinSta rs Sy st em s, In c., res pe ct iv el y . In t ax y ear 2 00 6 p et it io ne r rec ei ve d $4 4,5 50 inwage s fr om

ADECCO USA, Inc., an d $ 4,8 72 inno ne m pl oyee co m pe ns at io n fr om

Twin st ars Co rp . On Oct ob er 1 5, 2 00 7, re sp on de ntis su edpe ti ti on er two n ot ic es of de fic ie nc y , on e fo r ta x year 20 04 an d the othe r fo r ta x year 20 05 . The n ot ic e o f de fic ie nc y

fortax y ear 2 00 4 d et erm in eda de fic ie nc y of $ 13 ,33 0 andad di ti on s t o ta x p ur su an t t o s ect io ns 66 51 (a)( 1) an d (2 ) an d 6 65 4( a) o f $2 ,99 9, $ 1,8 66 , and $3 87 , res pe ct iv el y . The n ot ic e o f de fic ie nc y fortax y ear 2 00 5 d et erm in eda de fic ie nc y

of $ 7,4 61 an d a dd it io ns to tax pu rs ua ntto sec ti on s 6 65 1( a)(1 ) an d (2 )
an d 6 65 4( a) o f $1 ,67 9, $ 59 7, an d $ 29 9, re sp ect iv el y . On Ja nu ary 12 , 20 09 , res po nd en t i ss ue d p et it io ne r a n ot ic e o f de fic ie nc y for tax y ear 2 00 6 d et erm in in g a de fic ie nc y

of $ 7,4 02 an d a dd it io ns to tax pu rs ua ntto sec ti on 66 51 (a)( 1) an d (2 ) of $5 05 an d $ 21 3, re sp ect iv el y .- 4 -

[* 4] All th ree n ot ic es of d efi ci en cy were m ai le d t o p et it io ne r atanad dr es s i n Arli ng to n, Vi rg in ia . The Arl in gt on , Virg in ia , add res s was pe ti ti on er’s l as t kno wn ad dr es s as li st edinres po nd en t’s re co rd s wh enth e n ot ic es were m ai le d. Al l thr ee no ti ces of d efi ci en cy

were re tu rn edto res po nd en t unc la im ed . Peti ti on er d idno t rece iv e an y

of t he no ti ces of d efi ci en cy an d d idno t fi le a pe ti ti oninres po ns e to
an y of t he se no ti ces . On J un e 1 , 20 10 , res po nd en t s en t p et it io ne r a Let te r 10 58 , Fin al Not ic e o f In te ntto Levy andNot ic e o f You r Ri gh t t o aHeari ng (le vy no ti ce), wi thres pe ctto hi s i nc om e ta x l iabi li ti es fortax y ears 20 04 , 20 05 , and20 06 . The l ev y no ti ce was m ai le d t o p et it io ne r’s curren t ad dr es s i n S il ve r Sp rin g, M arylan d. OnJu ly 23, 20 10 , pet it io ne r ti m el y

fil eda Fo rm

12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s orEqu iv al en t Hea rin g, re ga rd in g the pro po se d l ev y act io n. On Fe brua ry

3, 2 01 1, a s et tl em en t o ffi cer s en t p et it io ne r a l et te r sc he du li ng a te le ph on e co nf

eren ce ca ll forMarc h 1 6, 2 01 1. OnMarc h 1 6, 2 01 1, p et it io ne r cal le d the set tl em en t o ffi cer. Durin g the tel ep ho ne co nf eren ce p et it io ne r (1 ) reque st eda face -to -fac e co ll ect io n due pro ces s (C DP) h eari ng , (2) in di cat edth at he wis he d t o c ha ll en ge th e und erl y in g l iabi li ti es with re sp ectto all th ree years i n is su e, an d (3 ) in di cat edth athe ne ve r rece iv eda no ti ce o f de fic ie nc y fortax y ears 20 04 , 20 05 , and20 06 . Upo n h eari ng pe ti ti on er’s co nt en ti on th athe di d n ot- 5 -

[* 5] rece iv e an y

no ti ce o f de fic ie nc y , th e se tt le m en t o ffi cer e nd edth e te le ph on e co nf eren ce i n o rd er t o v eri fy

it . After v eri fy in g tha t the no ti ces of d efi ci en cy ha d be enreturne d t o re sp on de nt , th e se tt le m en t o ffi cer c al le d p et it io ne r on Apri l 6 , 20 11 , andin fo rm edhi m

th athe co ul d c ha ll en ge th e und erl y in g l iabi li ti es an d tha t hi s ca se wou ldbe reas si gn edto a ne w set tl em en t o ffi cer. On Ap ril 26 , 20 11 , a se co ndset tl em en t o ffi cer m ai le d alet te r to pe ti ti on er sc he du li ng a te le ph on e co nf eren ce ca ll forJu ne 2, 2 01 1. OnMay 9, 20 11 , th e se tt le m en t o ffi cer c al le d p et it io ne r. The s et tl em en t o ffi cer ( 1) in di cat edth athe
co ul d n otap pr ov e p et it io ne r’s reque stfora face -to -fac e CDP h eari ng un le ss pe ti ti on er p ro vi de d s ig ne d F orm s 1 04 0 fo r th e y ears inis su e, (2 ) de cl in ed pe ti ti on er’s reque stto tap e rec or d the CDP h eari ng , and(3) in di cat edth at pe ti ti on er wo ul d n otbe pe rm it te d t o c ha ll en ge hi s u nd erl y in g l iabi li ti es fortax y ears 20 04 th ro ug h 2 00 6 b ecau se no ti ces of d efi ci en cy ha d b eenm ai le d t o h is las t kn own ad dr es s. Pet it io ne r de cl in edto pro vi de si gn edFo rm s 1 04 0. On J un e 2 , 20 11 , a tel ep ho ne CDP h eari ng was h el d b etweenth e se tt le m en t of fic er an d p et it io ne r. Pet it io ne r was no t al lo wedto ch al le ng e th e und erl y in g li ab il it ie s fo r ta x years 2 00 4 thr ou gh 20 06 or t o t ap e rec or d the CDP h eari ng . On Ju ne 6, 2 01 1, the set tl em en t o ffi cer m ai le d p et it io ne r a l et te r co nt ai ni ng co pi es of th e n ot ic es of d efi ci en cy

fortax y ears 20 04 , 20 05 , and20 06
.- 6 -

[* 6] On J un e 9 , 20 11 , res po nd en t i ss ue d p et it io ne r a n ot ic e o f de te rm in at io n su st ai ni ng th e p ro po se d l ev y act io n. On J ul y 13 , 20 11 , pet it io ne r fi le d ati m el y pe ti ti on . In h is pe ti ti on , pe ti ti on er ra is edth e fo ll owi ng is su es : (1 ) pe ti ti on er d is pu te d the un de rlyin g li ab il it ie s fo r ta x years 2 00 4 thr ou gh 20 06 ; (2 ) pe ti ti on er d idno t re cei ve ti m el y no ti ce o f th e n ot ic es of d efi ci en cy fortax y ears 20 04 th ro ug h 2 00 6; (3) res po nd en t was no t au th or iz edby law to pre pa re s ub st itut es forreturns ; (4 ) th e co m pe ns at io n pe ti ti on er re cei ve d fo r ta x years 2 00 4 thr ou gh 20 06 was n otin co m e; (5)
res po nd en t d idno t s pe ci fic al ly ide nt ify whic h p ro vi si on s o f th e Co de m ak e pe ti ti on er l iabl e fo r Fed eral in co m e ta x; (6) th e se tt le m en t o ffi cer d idno t co m pl y with the requi rem en ts of s ect io n 6 50 1( c)(3 ) in co nduc ti ng th e CDP h eari ng ; (7 )
res po nd en t d idno t n ot ify pet it io ne r of hi s ap pe al rig ht s; an d (8 ) pe ti ti on er was no t gi ve n an o pp ortu ni ty to d is pu te hi s und erl y in g l iabi li ti es . On M ay 11 , 20 12 , res po nd en t fi le d am ot io n t o re m an d thi s ca se to res po nd en t’s Ap pe al s Off ic e to ho lda ne w CDP he ari ng . On Ju ne 13 , 20 12 , we gr an te d re sp on de nt ’s m ot io n andord eredres po nd en t t o p ro vi de a face -to -fac e CDP h eari ng at areas on ab le an d m utua ll y ag reed -upo n d at e an d t im e. On J ul y 12 , 20 12 , a th irdset tl em en t o ffi cer m ai le d p et it io ne r a l et te r sc he du li ng a te le ph on e co nf eren ce ca ll forAug us t 1 0, 2 01 2. OnJu ly 26, 2 01 2,- 7 -

[* 7] pe ti ti on er m ai le d alet te r to th e se tt le m en t o ffi cer r eque st in g tha t the CDP he ari ng be he ldface -to -fac e atth e App eal s Off ic e cl os es t t o h is res id en ce. On Au gu st10 , 20 12 , a face -to -fac e CDP h eari ng was h el d b etweenth e se tt le m en t o ffi cer andpe ti ti on er. The set tl em en t o ffi cer p ro vi de d p et it io ne r co pi es of th e n ot ic es of d efi ci en cy an d a cco un t tran sc rip ts for tax y ears 20 04 th ro ug h 20 06 . Peti ti on er i nd ic at edth athe wis he d t o c ha ll en ge th e und erl y in g t ax li ab il it ie s. Th e se tt le m en t o ffi cer i nf orm edpe ti ti on er tha t h e co ul d c ha ll en ge th e un de rlyin g l iabi li ti es by pro vi di ng Fo rm s 1 04 0 fo r ta x years 2 00 4 thr ou gh 20 06
. Pet it io ne r de cl in edto pro vi de th e se tt le m en t o ffi cer wi th an y do cu m en ts reg ard in g hi s u nd erl y in g l iabi li ti es . On J anua ry

25 , 20 13 , th e se tt le m en t o ffi cer i ss ue d p et it io ne r a s up pl em en ta l
no ti ce o f de te rm in at io n s us ta in in g the pro po se d l ev y act io n. OPINION Sect io n 6 33 1( a) au th or iz es th e Sec ret ary to lev y up onth e p ro pe rty and pr op erty rig ht s o f a t ax pa y er wh o fa il s t o p ay a ta x wi th in10 day s af

te r a n ot ic e an d d em an d. Be fo re the Secr et ary m ay lev y up on th e ta xp ay er’s p ro pe rty, the Secr et ary m

us t n ot ify him orhe r of

th e Sec ret ary’ s i nt en ti on to m ak e th e le vy. Sec. 6 33 1( d) (1 ). The Se cret ary m us t al so no ti fy

th e ta xp ay er o f hi s o r he r ri gh t t o a CDP h eari ng . Sec. 6 33 0( a)(1 ).- 8 -

[* 8] If the tax pa y er re qu es ts a CDP h eari ng , th e h eari ng is co nduc te d b y th e App eal s Off

ic e. Sec. 6 33 0( b) (1 ). At th e h eari ng th e ta xp ay er m ay rai se an y rel ev an t i ss ue rel at in g t o the unpa idtax or t he pro po se d l ev y . Sec. 6 33 0( c)(2 )(A). Onc e th e se tt le m en t o ffi cer m ak es a de te rm in at io n, the tax pa y er m ay ap pe al th e de te rm in at io n t o thi s C ou rt. Se c. 63 30 (d )(1 ). The C ou rt h as juri sd ic ti on to rev ie w th e Co m m is si on er’s ad m in is tra ti ve de te rm in at io ns . Id. I. St an dardof R ev ie w Whe re the va li di ty of th e und erl y in g t ax li ab il ity is pro pe rly at is su e, we rev ie w th atm at te r de no vo . Seg o v . Comm is si on er, 1 14 T.C. 60 4, 6 10 (20 00 ); Goz a v . Comm is si on er, 1 14 T.C. 17 6, 1 82 (20 00 ). A tax pa y er m ay ch al le ng e th e un de rlyin g t ax li ab il ity

du rin g aCDP h eari ng if h e o r sh e d idno t re cei ve a st atut ory no ti ce o f de fic ie nc y

forth e li ab il ity

or d idno t o th erwi se ha ve th e op po rtu ni ty to d is pu te th e li ab il ity . Sec. 6 33 0( c)(2 )(B) ; s ee al so Mo nt go m ery v. Co m m is si on er, 1 22 T.C. 1, 9 (20 04 ). The C ou rt c on si de rs anun de rlyin g t ax li ab il ity onrev ie w on ly if th e ta xp ay er p ro pe rly rais edth e is su e dur in g the CDP he ari ng . Sec. 3 01 .63 30 -1 (f)(2 ), Q&A-F5 , Pro ced . & Adm in . Reg s.; see als o Giam el li v. Co m

m is si on er, 1 29 T.C. 10 7, 1 15 (20 07 ). All th ree n ot ic es of d efi ci en cy were m ai le d t o p et it io ne r atanad dr es s i n Arli ng to n, Vi rg in ia . All thr ee n ot ic es of d efi ci en cy were re tu rn edto res po nd en t- 9 -

[* 9] un cl ai m ed . Becau se pe ti ti on er d idno t re cei ve an y of t he no ti ces of de fic ie nc y , he was un ab le to fil e a p et it io n i n re sp on se to an y of t he m with thi s Co urt. Res po nd en t h as co nf

irmed th atpe ti ti on er d idno t re cei ve co pi es of t he
no ti ces of d efi ci en cy

un ti l h is CDP h eari ng . Thu s, p et it io ne r co ul d p ro pe rly ch al le ng e th e und erl y in g t ax li ab il it ie s athi s C DP he ari ng . Res po nd en t co nt en ds th atpe ti ti on er h ada pr io r op po rtu ni ty to co nt es t h is li ab il it ie s atth e supp le m en ta l CDP he ari ng . Duri ng pe ti ti on er’s i ni ti al CDP he ari ng pe ti ti on er i nd ic at edth athe wou ldli ke to ch al le ng e h is un de rlyin g li ab il it ie s fo r th e y ears at i ss ue , bu t h e was no t al lo wedto do so . At th e supp le m en ta l CDP he ari ng pe ti ti on er al so in di cat edth athe wis he d t o c ha ll en ge th e und erl y in g t ax li ab il it ie s. Re sp on de ntackno wled ge d i n the no ti ce o f de te rm in at io n tha t p et it io ne r ha d ra is edis su es co nc ern in g h is un de rlyin g l iabi li ti es du rin g the CDP h eari ng . See Cant rel l v . Comm is si on er, T.C. Mem o. 2 01 2- 25 7, at *5 -* 6. Si nc e p et it io ne r di d n otrece iv e st atut ory no ti ces of d efi ci en cy

fortax y ears 20 04 th ro ug h 2 00 6 anddi d n otothe rwis e h av e th e o pp ortu ni ty to d is pu te th e li ab il it ie s, we re vi ew hi s u nd erl y in g l iabi li ti es de no vo . The Co urt re vi ews adm in is tra ti ve de te rm in at io ns by the Co m m is si on er’s App eal s Off

ic e reg ard in g n on li ab il ity is su es forab us e o f di sc ret io n. Ho y le v.- 10 -

[* 10 ] Co m

m is si on er, 1 31 T.C. 19 7, 2 00 (20 08 ); Go za v . Comm is si on er, 1 14 T.C. at18 2. Inde te rm in in g abu se of d is cret io n, we co ns id er wh ethe r th e d et erm in at io n was arb itrary, capri ci ou s, o r witho utso un d b as is infactor l aw. See, e.g ., Mur ph y v. Co m m is si on er, 1 25 T.C. 30 1, 3 20 (20 05 ), aff’d, 4 69 F.3d27 (1s t Ci r. 20 06 ); W oo dr al v. Co m

m is si on er, 1 12 T.C. 19 , 23 (19 99 ). The C ou rt d oe s n otco nduc t
anin de pe nd en t re vi ew an d s ub st itut e it s ju dg m en t fo r th atof the set tl em en t of fic er. Murp hy v. Co m

m is si on er, 1 25 T.C. at 3 20 . Rath er, i f th e se tt le m en t of fic er fo ll ows all st atut ory an d a dm in is tra ti ve gu id el in es an d p ro vi de s a r eas on ed , ba lanc edde ci si on , th e Co urt wi ll no t re weig h the equi ti es . Linkv. Co m m is si on er, T.C. Mem o. 2 01 3- 53 , at * 12
. II. Pet it io ne r’s Und erl y in g Li ab il it ie s Pet it io ne r co nt en ds th atth e n on em pl oyee co m

pe ns at io n andwage s h e rece iv edfortax y ears 20 04 th ro ug h 2 00 6 d o n otco ns ti tu te in co m e und er s ect io n 61 an d tha t h e is no t l iabl e fo r ad di ti on s t o t ax un de r se ct io ns 66 51 (a)( 1) an d (2 )
an d 6 65 4( a). A. Unr ep orte d In co m e Gen eral ly, th e Co m

m is si on er’s d et erm in at io ns ina no ti ce o f de fic ie nc y are pr es um edco rrec t, an d the tax pa y er b ears th e b ur de n o f pr ov in g tho se de te rm in at io ns are erro ne ou s. See Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1,- 11 -

[* 11 ] 11 5 (1 93 3) . In o rd er t o s hi ft t he bu rd en , th e ta xp ay er m us t co m pl y with a ll
subs tant ia ti on an d re co rdke ep in g re qu ire m en ts an d c oo pe rat e wit h a ll reas on ab le reque st s b y

th e Co m mis si on er fo r witne ss es , in fo rm at io n, d oc um en ts , m eet in gs , an d i nt erv ie ws p ur su an t t o s ect io n 7 49 1( a)(2 ). See Hi gb ee v . Comm is si on er, 1 16 T.C. 43 8, 4 41 (20 01 ). Pet it io ne r di d n otarg ue th atth e b ur de n s ho ul d s hi ft, andhe fai le d t o i nt ro du ce cr ed ib le ev id en ce tha t re sp on de nt ’s det erm in at io ns are in co rrec t. The bu rd enof p ro of rem ai ns with p et it io ne r. Sect io n 6 1 p ro vi de s tha t “ gr os s i nc om e m ean s al l i nc om e fro m what ev er so ur ce d eri ve d” . Sect io n 6 1( a)(1 ) in cl ud es as i nc om e “ [c]om pe ns at io n fo r se rv ic es , in cl ud in g fe es , comm is si on s, fr in ge be ne fit s, an d s im il ar i te m s” . The Supr em e Co urt h as he ldco ns is te nt ly tha t g ro ss in co m e “ was us edby Con gr es s t o ex ertinth is fie ld‘ th e fu ll m eas ur e o f th e ta xi ng po wer.’” Comm is si on er v . Glen sh aw Glas s C o., 3 48 U.S. 42 6, 4 29 (19 55 ) (quo ti ng Helv eri ng v. Cl iff or d, 3 09 U.S. 33 1, 3 34 (19 40 )). The in di vi du al earn in g the in co m e is li ab le forth e pa ym en t o f th e in co m e ta x. Se e Luc as v. Earl , 28 1 U.S. 1 11 , 11 4- 11 5 (1 93 0) . The ta xp ay er h as th e b ur de n o f de m on strat in g tha t h is or h er ac ces si on to weal th is
ex em ptfro m tax at io n. Co m

m is si on er v . Glen sh aw Glas s C o., 3 48 U.S. at 4 30
. Pet it io ne r, a res id en t o f Mary land , is a ta xp ay er s ub ject t o F ed eral in co m e ta x wh o i s o bl ig edto fil e Fed eral in co m e ta x re tu rn s an d t o p ay Fed eral in co m e ta x- 12 -

[* 12 ] onhi s i nc om e, sp eci fic al ly inc lu di ng no ne m pl oyee co m

pe ns at io n and wag es . See s ecs . 1, 6 1( a), 6 01 2( a), 7 70 1( a)(1 ), (1 4) ; s ee al so Uni te d S ta te s v . Ro m ero , 64 0 F .2d10 14 , 10 16 (9t h C ir. 1 98 1) (“ Co m pe ns at io n fo r labo r or se rv ic es , pai d i n the form of wa ge s o r sa lary , has be enun iv ers al ly hel d b y th e co urts of t hi s re publ ic to be in co m e, subjec t t o the in co m e ta x l aws curren tl y ap pl ic ab le .”). At tria l re sp on de ntpro vi de d anu m be r of Fo rm s 1 09 9- MIS C, Mi sc el lane ou s In co m e, a Fo rm

W -2 , W ag e an d Tax Sta te m en t, an d o th er d oc um en ta ti on th at in di cat edth atpe ti ti on er h adrece iv edno ne m pl oyee co m

pe ns at io n andwage s fo r ta x years 2 00 4 thr ou gh 20 06 . Peti ti on er s ti pu la te d tha t h e rec ei ve d n on em pl oyee co m pe ns at io n andwage s fo r ta x years 2 00 4 thr ou gh20 06 inth e am ou nt s s ho wn on th e Fo rm s 1 09 9- MIS C an d F orm W -2 , andhe di d n otpro vi de an y ev id en ce t o su gg es t tha t the am ount s o f in co m e h e rec ei ve d wer e d iff eren t fr om

th e am ou nt s st at edinth e n ot ic es of d efi ci en cy . W e fi ndth atpe ti ti on er’s n on em pl oyee co m pe ns at io n andwage s co ns ti tu te in co m e und er s ect io n 6 1( a), an d we s us ta in
res po nd en t’s d et erm in at io ns . B. Add it io n t o Tax Und er s ect io n 7 49 1( c) the Co m m is si on er h as th e b ur de n o f pr oduc in g ev id en ce wi th res pe ctto a ta xp ay er’s l iabi li ty for an y ad di ti on to tax . See Hig be e- 13 -

[* 13 ] v. Co m

m is si on er, 1 16 T.C. at 4 46 -4 47 . To m eetth is bu rd enof p ro du ct io n, th e Co m m is si on er m

us t co m e fo rwardwith s uf fic ie ntev id en ce tha t i t i s ap pr op ria te to im

po se th e ad di ti on to tax . Id. On ce the Co m m is si on er m eet s thi s bu rd en , th e ta xp ay er m

us t co m e fo rwardwith e vi de nc e su ffi ci en t t o p ers ua de th is Co urt tha t the de te rm in at io n i s i nc orrect . Id. Res po nd en t d et erm in edth atpe ti ti on er i s l iabl e und er s ect io n 6 65 1( a)(1 ) fo r anad di ti on to tax for

fai lure t o t im el y

fil e a return fo r eac h year inis su e. Sect io n 66 51 (a)( 1) auth or iz es th e im po si ti on of a n a dd it io n t o t ax forfai lu re t o t im el y fil e a return, u nl es s i t i s s ho wn tha t s uc h fa il ur e is du e to reas on ab le cau se an d n otdu e to wil lfu l n eg le ct . A fail ur e to fil e a t im el y Fed eral in co m e ta x re tu rnis du e to reas on ab le cau se if the tax pay er ex erci se d o rd in ary bu si ne ss care an d p ru de nc e b ut ne ve rth el es s was un ab le to fil e th e return wi th inth e p res cri be d t im e. See s ec. 30 1.6 65 1- 1( c)(1 ), Pro ced . & Adm in . Reg s. Will fu l n eg le ctm ean s a c on sc io us , in te nt io na l fa il ur e to fil e o r rec kl es s i nd iff eren ce t owa rdfil in g. Un it edSta te s v . Bo y le , 46 9 U.S. 2 41 , 24 5 (1 98 5)
. Res po nd en t m etth e b ur de n o f pr oduc ti on by intro du ci ng ev id en ce tha t pe ti ti on er d idno t fi le ti m el y returns forth e y ears inis su e. Pet it io ne r di d n ot in tro du ce an y

ev id en ce t o e xp la inhi s fa il ur e to do so . Con se qu en tl y , we su st ai n res po nd en t’s d et erm in at io ns as t o the sec ti on 66 51 (a)( 1) ad di ti on to tax .- 14 -

[* 14 ] Res po nd en t al so de te rm in edth atpe ti ti on er i s l iabl e und er s ect io n 66 51 (a)( 2) for

ad di ti on s t o t ax forfai lu re t o t im el y pay tax sh own ona return fo r each y ear i n i ss ue . Sect io n 6 65 1( a)(2 ) im po se s an ad di ti on to tax forfai lu re t o p ay th e am ou ntof t ax sh own ona ta xp ay er’s Fed eral in co m e ta x re tu rnonor b efo re th e p aym en t due da te un le ss su chfai lu re i s due to reas on ab le cau se an d n otdu e to wil lfu l n eg le ct . The s ect io n 6 65 1( a)(2 ) ad di ti on to tax ap pl ie s o nl y when an am ountof t ax is sh own ona return fi le d b y th e ta xp ay er o r pr ep aredby the Secr et ary. Sec. 6 65 1( a)(2 ), (g )(2 ); C ab ira c v . Comm is si on er, 1 20 T.C. 16 3, 1 70 (2 00 3) . Whe n atax pa y er h as no t fi le d areturn, the sec ti on 66 51 (a)( 2) ad di ti on to ta x m ay no t b e im

po se d unl es s the Secr et ary ha s p rep areda subs ti tu te forreturn th atsat is fie s the requi rem en ts of s ect io n 6 02 0( b) . See Wheel er v . Comm is si on er, 12 7 T.C. 2 00 , 21 0 (2 00 6) , aff’d, 5 21 F.3d12 89 (10 th Cir . 20 08 ). Res po nd en t m etth e b ur de n o f pr oduc ti on by pro du ci ng ev id en ce tha t res po nd en t p rep areda subs ti tu te forreturn fo r pe ti ti on er fo r eac h year inis su e, each sh owe d t ax du e, an d p et it io ne r di d n otpay th e am ou ntof t ax du e b y th e pa ym en t due da te . Peti ti on er d idno t fi le a Fed eral in co m e ta x re tu rnforan y of t he y ears inis su e. Howev er, res po nd en t p rep areda subs ti tu te forreturn o n pe ti ti on er’s b eh al f fo r eac h o f th e th ree years i n i ss ue . The s ub st itut es forreturns sa ti sf y th e requi rem en ts of s ect io n 6 02 0( b) . For e ach y ear i n i ss ue th e subs ti tu te- 15 -

[* 15 ] forreturn re sp on de ntfil edon pe ti ti on er’s b eh al f sh owe d t ax du e. Pet it io ne r di d n otha ve an y

Fed eral in co m e ta x wi th he ldfro m hi s i nc om e fo r ta x years 2 00 4
an d 2 00 5. Pe ti ti on er was gi ve n c red itforth e $ 5,1 56 withh el d fr om hi s g ro ss in co m e fo r ta x year 20 06 ; h owe ve r, th e ta x re tu rnfortax y ear 2 00 6 s ho wed ad di ti on al tax du e. Pet it io ne r di d n otm ak e an y est im at edFed eral in co m e ta x pa ym en ts fortax y ear 2 00 4, 2 00 5, o r 20 06 . Con se qu en tl y , we su st ai n res po nd en t’s d et erm in at io ns as t o the sec ti on 66 51 (a)( 2) ad di ti on s t o t ax . Res po nd en t al so de te rm in edth atpe ti ti on er i s l iabl e fo r ad di ti on s t o t ax for fai lu re t o p ay

est im at edtax un de r se ct io n 6 65 4 fo r ta x years 2 00 4 and20 05
. Sect io n 6 65 4( a) i m

po se s an ad di ti on to tax on a ta xp ay er wh o u nd erp ay s h is or h er es ti m at edtax . The ad di ti onto tax is cal cu la te d wi th refe ren ce t o fo ur requi red in st al lm en t p aym en ts of t he tax pa y er’s es ti m at edtax li ab il ity . Sec. 6 65 4( c) an d (d ). Eachrequi redin st al lm en t o f es ti m at edtax is equa l t o 2 5% o f th e “ requi red
an nu al paym en t” . Sec. 6 65 4( d) . The requi redan nu al paym en t i s equa l t o the le ss er o f (1 ) 90 % of t he tax sh own on th e in di vi du al ’s tax return fo r th aty ear ( or , if n o t ax return i s fi le d, 9 0% o f hi s o r he r ta x fo r su chy ear) , or (2 ) if th e in di vi du al fil eda ta x re tu rnforth e imm ed ia te ly prece di ng tax ab le y ear, 1 00 % of t he tax sh own onth attax return. Se c. 66 54 (d )(1 )(A)-( C). A tax pay er h as anob li ga ti on to pa y est im at edtax on ly if he or s he ha s a r equi redan nu al pay m en t. Wheel er v .- 16 -

[* 16 ] Co m

m is si on er, 1 27 T.C. at 2 12 ; s ee al so Men de s v . Comm is si on er, 1 21 T.C. 30 8, 3 24 (20 03 ). To m eetth e b ur de n o f pr oduc ti on with re ga rdto th e se ct io n 6 65 4( a) ad di ti on to tax , res po nd en t m us t, ata min im

um , pro du ce ev id en ce n eces sa ry to en ab le th e Co urt t o c on cl ud e th atpe ti ti on er h adrequi redan nu al pay m en ts for 20 04 an d 2 00 5. Se e Wheel er v . Comm is si on er, 1 27 T.C. at 2 11 . Alth ou gh pe ti ti on er d idno t fi le tax returns forth e y ears inis su e, res po nd en t p ro vi de d c op ie s of subs ti tu te s fo r returns pre paredonpe ti ti on er’s b eh al f fo r ta x years 2 00 4 and 20 05 . Bot h s ub st itut es forreturns sh owe d t ax du e. Pet it io ne r adm it s tha t h e h as no t fi le d h is tax returns forov er a d ecad e, th athe di d n otha ve su ffi ci en t Fe de ral in co m e ta x wi th he ldby his em pl oyers fo r ta x year 20 04 or 2 00 5, an d tha t h e m ad e no est im at edtax paym en ts fortax y ears 20 04 an d 2 00 5. Re sp on de ntha s m etth e bu rd enof p ro du ct io n, es tabl is hi ng th atpe ti ti on er was requi redto m ak e es ti m at ed ta x p aym en ts fortax y ears 20 04 an d 2 00 5 b utfai le d t o d o s o. Pe ti ti on er d oe s n ot qu al ify for an y

of t he ex cep ti on s l is te d i n s ect io n 6 65 4( e). Co ns eque nt ly, we su st ai n re sp on de nt ’s det erm in at io ns as t o the sec ti on 66 54 (a) a dd it io ns to tax . III. The Non li ab il ity

Dete rm in at io ns Fo ll owi ng a CDP h eari ng th e se tt le m en t o ffi cer m us t d et erm in e whe th er t o su st ai n the co ll ect io n a ct io n, i n thi s ca se th e im po si ti onof alev y . In m ak in g tha t- 17 -

[* 17 ] de te rm in at io n, s ect io n 6 33 0( c)(3 ) pr ov id es th atth e se tt le m en t o ffi cer m us t
co ns id er: (1) whet he r th e requi rem en ts of a ny app li cab le law o r adm in is tra ti ve pr oc edur e h av e b eenm et ; (2 ) an y is su es ap pr op ria te ly rais edby the tax pa y er; an d (3 ) whe th er the pro po se d l ev y act io n b al an ces th e n eedforth e eff ic ie ntco ll ect io n of tax es an d the leg it im at e co nc ernof t he tax pa y er tha t an y co ll ect io n a ct io n b e n o m or e in tru si ve th anne ces sary . Lun sf or d v . Comm is si on er, 1 17 T.C. 18 3, 1 84 (2 00 1) ; Di am on d v . Comm is si on er, T.C. Mem o. 2 01 2- 90 , sl ip op . at 6 -7 . W e n ot e th atth e se tt le m en t o ffi cer p ro pe rly bas edhi s d et erm in at io n o n the requi redfact or s. Th e se tt le m en t o ffi cer (1 ) ve rif ie d tha t al l l eg al an d p ro cedur al requi rem en ts ha d b eenm et , (2) co ns id eredth e is su es pe ti ti on er ra is ed , and(3) de te rm in edth atth e p ro po se d c ol le ct io n a ct io n app ro pr ia te ly bal an cedth e n eedfor th e eff ic ie ntco ll ect io n o f ta x wi th th e le gi ti m at e co nc ernof p et it io ne r th atth e co ll ect io n a ct io n b e n o m or e in tru si ve th anne ces sa ry . Pet it io ne r co nt en ds th athe is en ti tl edto on ly one CDP h eari ng fora gi ve n ta x p eri odan d tha t the supp le m en ta l CDP he ari ng co ns ti tu te d an i nv al idsec on d CDP h eari ng fortax y ears 20 04 , 20 05 , and20 06 . Peti ti on er i s es se nt ia ll y co nt en di ng th atwe canrev ie w on ly the de te rm in at io n fr om th e CDP h eari ng th at ga ve ris e to th e p et it io n i n thi s ca se an d tha t we co m m it te d e rro r whe n we rem an de d thi s ca se fora supp le m en ta l CDP he ari ng . It i s wel l s ettl edth ata- 18 -

[* 18 ] tax pa y er i s en ti tl edto a si ng le he ari ng un de r se ct io n 6 33 0 wi th res pe ctto th e y ear t o wh ic h the unpa idli ab il ity rel at es . Sec. 6 33 0( b) (2 ); Ke lb y v. Co m m is si on er, 1 30 T.C. 79 , 86 (20 08 ); F rei je v. Co m m is si on er, 1 25 T.C. 14 , 22 (2 00 5) . Howev er, wh enth e Co urt re m an ds a cas e to App eal s, the furth er h eari ng is a supp le m en t t o the tax pa y er’s o rig in al sec ti on63 30 he ari ng , no t a n ew he ari ng . Kelb y v. Co m mis si on er, 1 30 T.C. at 8 6. Th e supp le m en ta l CDP he ari ng all ows th e p art ie s t o c om

pl et e th e in it ia l s ect io n 6 63 0 h eari ng whi le pre se rv in g the ta xp ay er’s ri gh t t o re cei ve jud ic ia l re vi ew of th e u lt im at e adm in is tra ti ve de te rm in at io n. Id . W e fi ndth atpe ti ti on er was pro vi de d o nl y on e CDP h eari ng for each of t ax y ears 20 04 , 20 05 , and20 06
. Pet it io ne r co nt en ds th atres po nd en t d idno t p ro vi de hi m with any adm is si bl e ev id en ce t o s up po rt t he de te rm in at io n o r with any sta tu to ry pro vi si on s tha t m ak e hi m li ab le fora ta x. Se ct io n 6 33 0( c)(1 ) do es no t re qu ire th e App eal s o ffi cer t o rel y onan y parti cu lar do cu m en t i n s at is fy in g the ve rif ic at io n re qu ire m en t an d d oe s no t re qu ire th atth e App eal s o ffi cer a ctua ll y gi ve th e ta xp ay er a co py of th e do cu m en ts up on whi chhe or s he rel ie d. Cr ai g v . Comm is si on er, 1 19 T.C. 25 2, 26 2 (2 00 2) ; Nes to r v. C omm is si on er, 1 18 T.C. 16 2, 1 66 (20 02 ). The s et tl em en t of fic er p ro vi de d p et it io ne r with aco py of a Fo rm 43 40 , Cert ifi cat e o f Ass es sm en ts , Paym en ts , andOth er Sp eci fie d M at te rs , anda co m pu te r tr an sc rip t- 19 -

[* 19 ] foreach tax y ear i n i ss ue . A Form 43 40 co ns ti tu te s p res um pt iv e ev id en ce th ata ta x h as be enva li dl y ass es se d p ur su an t t o s ect io n 6 20 3. Dav is v. Co m m is si on er, 1 15 T.C. 35 , 40 (20 00 ). W e h av e h el d s pe ci fic al ly that i t i s n otan ab us e o f di sc ret io n fo r anApp eal s o ffi cer t o re ly on aFo rm 43 40 , Nest or

v. Co m m is si on er, 1 18 T.C. at 1 66 ; Dav is v. Co m mis si on er, 1 15 T.C. at 4 1, o r a co m pu te r tr an sc rip t o f acc ou nt , Sch ro ed er v . Comm is si on er, T.C. Mem o. 2 00 2- 19 0; Man n v . Comm is si on er, T.C. Mem o. 2 00 2- 48 , to co m pl y with s ect io n 63 30 (c)( 1) . W e fi ndth atth e se tt le m en t o ffi cer p ro vi de d p et it io ne r with e vi de nc e of th e d et erm in at io n. Pet it io ne r co nt en ds th atth e subs ti tu te s fo r returns res po nd en t p rep aredon hi s b eh al f are no t v al idtax returns . Und er s ect io n 6 02 0( b) (1 ), th e Sec ret ary ha s th e au th or ity

to ex ecu te a ta x re tu rn“ [i]f an y pe rs on fai ls to m ak e an y return requi redby any

in te rn al rev enue law o r reg ul at io n m ad e th ereu nd er atth e ti m e pr es cri be d the refo r, orm ak es , wil lfu ll y or o th erwi se , a fal se or f rau du le ntreturn”
. Sect io n 6 02 0( b) (2 ) pr ov id es th at“ [a]ny return s o m ad e an d s ub sc rib edby the Secr et ary sh al l b e p rima facie go odan d s uf fic ie ntforall leg al pu rp os es .” The Secr et ary is au th or iz edto de te rm in e a d efi ci en cy ev enwhenth e ta xp ay er d oe s n ot fil e a t ax return. Hart m anv. Co m m is si on er, 6 5 T.C. 5 42 , 54 6 (1 97 5) ; s ec.- 20 -

[* 20 ] 30 1.6 21 1- 1( a), Pro ced . & Adm in . Reg s. We fin d tha t the subs ti tu te s fo r returns were v al idtax returns . W e fi ndth atth e se tt le m en t o ffi cer d idno t ab us e h is di sc ret io n i n uph ol di ng th e p ro po se d c ol le ct io n a ct io n. An y co nt en ti on we ha ve no t ad dr es se d i s irr el ev an t, m oo t, o r m eri tl es s. To re fle ctth e fo rg oi ng , Deci si on wil l b e en te red fo r res po nd en t.